STOCK-BASED COMPENSATION PLAN |
6 Months Ended |
|---|---|
Aug. 01, 2015 | |
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
| STOCK-BASED COMPENSATION PLAN |
STOCK-BASED COMPENSATION
The Company's stock-based compensation expense primarily includes the fair value of restricted stock units (RSUs) and employees' purchase rights under the Company's Employee Stock Purchase Plan. Stock-based compensation expense was $9.2 million and $27.8 million during the 13 and 26 weeks ended August 1, 2015, respectively. Stock-based compensation expense was $7.2 million and $23.9 million during the 13 and 26 weeks ended and August 2, 2014, respectively.
In connection with the Acquisition, options to purchase Family Dollar common stock (“Family Dollar Options”) that were outstanding prior to the Acquisition were converted into options to purchase, on the same substantive terms and conditions as were applicable to Family Dollar Options, a number of shares of common stock of the Company determined by multiplying the number of shares of Family Dollar common stock subject to such Family Dollar Options by 1.0000 (the “Award Exchange Ratio”), at an exercise price per share equal to the per share exercise price for the shares of Family Dollar common stock otherwise purchasable pursuant to the Family Dollar Options divided by the Award Exchange Ratio. The Company converted approximately 1.5 million Family Dollar Options into options to purchase Dollar Tree Common Stock or into unvested options to purchase Dollar Tree Common Stock and recognized $1.0 million of expense related to these options in each of the 13 and 26 weeks ended August 1, 2015. Stock options are valued using the Black-Scholes option-pricing model and compensation cost is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period.
In connection with the Acquisition, unvested Family Dollar RSUs that were outstanding prior to the Acquisition were converted into unvested Dollar Tree RSUs with the same substantive terms and conditions as were applicable to the Family Dollar RSUs, in respect of a number of shares of common stock of the Company determined by multiplying the number of shares of Family Dollar RSUs by the Award Exchange Ratio. The Company converted approximately 0.1 million unvested Family Dollar RSUs into unvested Dollar Tree RSUs and recognized $0.5 million of expense related to these RSUs in each of the 13 and 26 weeks ended August 1, 2015.
The Company granted approximately 0.3 million service-based RSUs from the Omnibus Incentive Plan (Omnibus Plan) to employees and officers in the 26 weeks ended August 1, 2015. The estimated $28.6 million fair value of these RSUs is being expensed ratably over the three-year vesting periods, or a shorter period based on the retirement eligibility of certain grantees. The fair value was determined using the Company's closing stock price on the date of grant. The Company recognized $2.2 million and $6.9 million of expense related to these RSUs during the 13 and 26 weeks ended August 1, 2015.
In the 26 weeks ended August 1, 2015 the Company granted 0.1 million RSUs with a fair value of $11.3 million from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in fiscal 2015. If the Company meets these performance targets in fiscal 2015, the RSUs will vest ratably over three years. The estimated fair value of these RSUs is being expensed ratably over the three-year vesting periods, or a shorter period based on the retirement eligibility of certain grantees. The Company recognized $0.6 million and $7.4 million of expense related to these RSUs in the 13 and 26 weeks ended August 1, 2015.
In the 26 weeks ended August 1, 2015 the Company granted RSUs with a fair value of $2.1 million from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets for the period beginning on February 1, 2015 and ending on February 3, 2018. Provided the vesting conditions are satisfied, the awards will vest at the end of the performance period. The estimated fair value of these RSUs is being expensed ratably over the three-year vesting period, or a shorter period based on the retirement eligibility of certain grantees. The Company recognized $0.1 million and $1.1 million of expense related to these RSUs in the 13 and 26 weeks ended August 1, 2015.
In March 2013, the Company granted RSUs ("2013 Grants") with a fair value of $1.4 million from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets for the period beginning on February 3, 2013 and ending on January 30, 2016 ("2013 Goal"). However, because the Acquisition was not yet contemplated as of the grant date, the 2013 Goal did not exclude costs related to the Acquisition or any income that may be attributable to Family Dollar during the performance period. In the 26 weeks ended August 1, 2015, the Company concluded that maintaining the 2013 Grants in their original form would undermine the Company's goals and create skewed incentives for the grantees.
Because amending the 2013 Goal would have jeopardized deductibility of the awards under Section 162(m) of the Internal Revenue Service Code, in the 26 weeks ended August 1, 2015, the Compensation Committee of the Board of Directors canceled the 2013 Grants and approved new awards (“2015 Supplemental Grants”), with a fair value of $2.2 million and a new operating income goal for the one-year period ending January 30, 2016 (“2015 Supplemental Goal”). The 2015 Supplemental Goal equals the amount remaining in the final year of the 2013 Goal, giving credit for actual Company performance utilizing an operating income definition that excludes both costs related to the Acquisition and income from Family Dollar. As such, the 2015 Supplemental Grants exactly replicate the incentive structure of the 2013 Grants had those awards excluded the effect of the then-unknown and unforeseeable Acquisition when they were granted. The Company recognized a $1.2 million reduction of expense related to the 2013 Grants cancellation in the 26 weeks ended August 1, 2015 and $0.3 million and $1.9 million of expense related to the 2015 Supplemental Grants in the 13 and 26 weeks ended August 1, 2015.
The Company recognized $4.4 million and $10.1 million of expense related to RSUs granted prior to fiscal 2015 in the 13 and 26 weeks ended August 1, 2015. For the 13 and 26 weeks ended August 2, 2014, the Company recognized $4.1 million and $9.8 million of expense related to these RSUs.
In the 26 weeks ended August 1, 2015, approximately 0.7 million RSUs vested and approximately 0.4 million shares, net of taxes, were issued. During the 26 weeks ended August 2, 2014, approximately 0.8 million RSUs vested and approximately 0.5 million shares, net of taxes, were issued. In the 13 weeks ended August 1, 2015 less than 0.1 million RSUs vested. Less than 0.1 million RSUs vested in the 13 weeks ended August 2, 2014.
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